Leadership Challenges Faced by Corporates in Emerging Economies

by R. Suresh
CEO, Stanton Chase International, India office

In highly developed economies such as US, Europe, Japan and the likes, corporate performance, performances of individual business units are systematically assessed. CEOs and the direct reportees to CEO are accordingly rated, groomed & deployed. Invariably the succession is planned resulting in either timely initiation of lateral hiring process or internal grooming process for identifying the next CEO. However, in developing countries with emerging economies, even the top corporates at times, have processes which are fragmented, leading to tremendous amount of challenges for achieving effective leadership. The article here below summarizes some of the core issues.

Currently, there are two types of CEOs holding reins of their organizations in Corporates in the developing economies such as say India, China, South American & East European countries. The first category type A, are CEOs who are tough with the times, flexible, charged with many-an-ammunition to strategize and lead the businesses into the foreseeable future (say 5 years). The second, type B, are the embattled ones, who are qualified alright but have lost the momentum somewhere along. They are clinging on to their roles since their corporate boards or the promoter groups still see succor in them or there is pretty much no viable alternative. If you now want to fast forward into future, the leadership solution seems obvious. Prop-up, motivate and aggressively encourage the type As gradually but firmly replace the type Bs. However, deep down, the solution is easier said than done. The corporate and it's leadership dynamics are far more deeply embedded in the organization, its people, the formal & informal processes that these challenges have to be addressed by the board with a firm grip. This leads us to believe leadership development, deployment & succession planning is beyond the realm of a formal HR system of compensation, motivation, performance management etc, which are more aptly applicable to the middle & entry levels of organization. The leadership issues are the preoccupation of the Chairman, the board and that of principal stakeholders. No surprise that chairmen of global corporates including some of the Indian corporations spend lot of time spotting & luring talent both from within and outside. The mute question from hereon is how does the Chairman handle the leadership issues in these turbulent times; here are few insights carved out of our assignment experiences.

1. Heart-hunt the type As, before they're headhunted:
   Type A leaders have abundant positive energy. They are invariably attuned to global market realities surrounding their enterprise and the industry. At times, though rarely, they are also good team managers and not individualistic and hence can make their business units and functional groups align with the central thought process. Obviously, the type A CEOs are in paucity, hence have highest probabilities to be picked-up by other competing organizations. The signals emitting from them will always be encouraging, but they may spring a sudden surprise by calling on the Chairman and announcing their decision to move out. If they move-out the organization has not only lost an able CEO but has a whole lot of 'stunned senior & middle management' members who form their own-opinions on how best the situation can be handled. It's here the Chairman should pre-empt the situation and ideally earn the loyalty of the CEO or atleast holdout a larger-bait to him/her for future milestones. Beyond the conventional HR measures, such CEOs should be made to feel co-stake holders, by providing seat on the boards, may be equity-options, generous performance linked payments and above all treating them as extended promoter-family members. The promoter or the Chairman should be genuinely concerned and display the concern in the well-being of the CEO and his family. In tough and good times alike, the CEO should be treated with respect and not side-stepped, thereby 'win-his-heart' before somebody 'hunts-his-head'.
2. Plan succession for type Bs:
   Type B CEOs invariably engage themselves in lackadaisical activities, they are seen more often involved in internally focused programs rather than external revenue generating initiatives. You may see them heading long-winded task forces on Quality, HR (travel policies!), ERP-implementation, capex-plg and whole host of functional subjects, when there are burning business issues of market share, pricing & margins, new products, value-chain, global trade opportunities, M&A and such issues. Type B CEOs place too much emphasis on their past success stories and examples. They somehow realize that they're running out of steam and while presenting a committed face, they simultaneously explore opportunities outside. It's here that Chairman should counter them, communicate the board's intention to replace, plan their exit time-lines, involve them in successor identification and most importantly design their exit-benefits in order they do not feel their past is not valued.
3. Finding Successor for type B:
   Generally speaking, potential successor would've got stunted or buried if not ejected out if there are type 'B' managers holding reins of corporate organizations for longish tenure as general apathy would've crept-in. Lateral hiring of a CEO who is as anxious and whole hearted for the marriage as the hiring organization is, is recommended, instead of hiring someone who's 'super-cast' alright but feels that he's too good for the hiring context. To come to think of it, the next CEO may not have been a CEO at all, he may come from one-level below in competing organizations (or in some cases from within the organization). Induction of the new CEO and exit of old CEO should be planned to accuracy with a fair amount of overlap to ensure no stunning happens.
4. Regrouping team under the type A CEO:
   When you've a new CEO or the current type 'A' CEO, its mandatory that you pepper the rest of the organization with bright managers who've confidence and fire to execute their roles. They should all be future type A CEOs. There are certain essential pre-qualifying characteristics which are sought in them: globality (abilities to conduct biz in global context), use of technology to reduce costs & improvise biz processes, operational excellence, fired-up all the time to position & market their products, services and other offerings and above all zeal at heart. Thus regrouped or rejigged team will energize the corporate, pressurize the CEO to take decisions quickly and strive to meet the goal set by the stakeholders.
5. Promoter CEOs to watch:
   40% of top 100 corporates in India for instance, have CEOs drawn from promoting families. They are CEOs at the first place because of their surnames, though they are obviously well qualified to do the role. They're equally vulnerable to fall into 'Type B' trappings. The perceived effect of replacing a type 'B' promoter CEO with type 'A' non-promoter CEO will be multifold.

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